Crude oil prices are down on Friday as fears about global growth outlook overwhelm the rising tensions in the Middle East, which could distort supply routes and raise prices.
The futures on US crude oil WTI depreciated by 1.08% to 56.72 USD per barrel, while the Brent variety reported a price drop of 0.08% to 63.25 USD per barrel.
The crude oil is under pressure because of fears of future demand against the backdrop of trade disputes that threaten global economic growth.
Losses on oil markets are, however, limited due to the extension of the agreement by the Organization of Petroleum Exporting Countries (OPEC) until March 2020 to reduce supplies.
Global growth remains the main driver of oil prices. The OPEC+ deal will protect the oil from more severe price cuts, but trade protectionism must be ended to ensure that demand for energy products is restored.
New orders for US factories shrank for the second month in a row in May.
The Energy Information Administration reported that crude oil stocks fell 1.1 million barrels, much less than the 5 million barrel drop projected by the American Petroleum Institute. This suggests that demand for oil in the United States, the world’s largest consumer of crude oil, may slow down against signs of a weakening economy.
Meanwhile, Britain’s Royal Navy arrested an Iranian oil tanker in Gibraltar on Thursday, which tried to transport oil to Syria in violation of EU sanctions – a move that may escalate Tehran’s confrontation with the West.
US crude oil inventories
The US crude and gasoline stockpiles fell less than forecast last week, while distillate inventories rose unexpectedly, according to the data of the Energy Information Administration.
Crude inventories fell by 1.1 million barrels in the last week, compared with analysts’ expectations for a decrease of 3 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 652,000 barrels, EIA said.
Refinery crude runs fell by 47,000 barrels per day, EIA data showed. Refinery utilization rates remained unchanged. Refinery runs have been partially limited as operations at the largest US East Coast refinery, in Philadelphia, were curtailed following a massive fire.
Gasoline stocks fell by 1.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.2 million-barrel drop.
Distillate stockpiles, which include diesel and heating oil, rose by 1.4 million barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.
Net US crude imports rose last week by 1.71 million barrels per day.
For the year, the US Energy Information Administration (EIA) projects US crude output will rise to 12.32 million barrels per day in 2019, up from the annual record of 10.96 million barrels per day in 2018.
US oil rig count
The US energy firms this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.
Drillers cut five oil rigs in the week to July 3, bringing the total count down to 788.
That compares with 863 rigs operating during the same week a year ago.
The rig count, an early indicator of future output, declined over the past seven months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
The US financial services firm Cowen & Co last week said that projections from the exploration and production (E&P) companies it tracks point to a 5% decline in capital expenditures for drilling and completions in 2019 versus 2018. Cowen said independent producers expect to spend about 11% less in 2019, while major oil companies plan to spend about 16% more.
In total, Cowen said all of the E&P companies it tracks that have reported will spend about 81.1 billion USD in 2019 versus 85.4 billion USD in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,014. Most rigs produce both oil and gas.